The Pew Charitable Trusts

WASHINGTON - For the second time in two years, members of Congress want to cut the federal contribution to welfare in order to divert the money to other programs, a plan critics denounce as an attack on the spirit of devolution and an abrogation of the landmark 1996 welfare agreement. 

Senate Appropriations Committee Chairman Ted Stevens, an Alaska Republican, has proposed tapping unspent welfare money to meet a Clinton administration request for emergency foreign aid for Jordan in the post-King Hussein era and Central America, parts of which were devastated by last October's Hurricane Mitch.A bill approved by his committee on March 4 would keep states from spending $350 million of their current federal welfare allotment until 2001. It would also cut $285 million from the food stamp program.

While Republican staffers insist the bill would merely defer excess welfare funds until the states "figure out how to spend it," advocates for the poor and for the states are heaping criticism on the committee's decision.

"This is not benign. An Appropriations Committee two years from now would have to find additional savings to restore these funds." said the National Conference of States Legislatures' (NCSL) Sheri Steisel.

Thirty-three states have left $3 billion in welfare money or $6 billion depending on whom you talk to untouched in the federal treasury. The unexpected windfall is disrupting the Washington coalition that brought about welfare reform in the first place. Defenders of states' rights are squaring off against their old comrades, the deficit hawks, while finding themselves allied with advocates for the poor who originally opposed the welfare law.

Foes of reform had argued, in part, that an annual lump-sum, welfare payment a block grant wouldbecome too great a temptation for congressional budget cutters down the road. "We've got to stop it now before it goes anywhere ... Congress made a promise to me and other governors that they would not cut our block grant," Wisconsin's Republican Gov. Tommy Thompson told the Milwaukee Journal-Sentinel Tuesday.

The NCSL, the National Governors' Association and their allies were prepared for this fight. Last year, they defeated a House Budget Committee plan to chop $10 billion from a variety of federal programs, including welfare.

Under this year's Senate proposal, New York State, with a cumulative welfare surplus of $689 million would lose the most, more than $79 million.

Pennsylvania, New Jersey and Florida, which like New York support some of the heaviest caseloads in the country, would each lose between $25 and $29.2 million. The 17 states that so far have spent or committed their share of federal money lose nothing. California, which receives more money annually for welfare than any other state, would not give up a dollar.

"We think it is fundamentally breaking the deal," said William Waldman, Executive Director of the American Public Human Services Association. "The deal was: states would be willing to live with a fixed amount of money in exchange for flexibility."

Under the 1996 law, states agreed to a capped federal contribution of about $16.5 billion a year, for six years, regardless of the size of their caseloads. In return, they received wider latitude in designing and running their welfare programs. The $16.5 billion figure reflects the annual federal share of welfare costs in the early 1990s, when caseloads in most states reached historic highs.

Since then, a zestful economy and strict, new rules for welfare recipients have caused welfare rolls to drop precipitously, and, for most states, unexpectedly, leaving a number of them in an unusual position; They have more dollars for aid to the poor than they currently want to spend.

According to Clinton administration estimates, 33 states and the District of Columbia left more than $3 billion unused in the federal treasury in 1997 and 98. Researchers at the Library of Congress and the Congressional Budget Office reported Tuesday they believe the actual surplus is twice as large, or more than $6 billion.

Regardless, legislators in most of these states believe they have committed the bulk of the money to rainy day' funds or to welfare-to-work programs. The 1996 law allows states to amass welfare reserves, but it also requires them to leave the money in the treasury until they actually spend it.

"We're only two and 1/2 years into the law. We're seeing a lot of positive results which, certainly, states should not be penalized for. And we don't know what's down the road," said Michael Kharfen, a spokesperson for the Department of Health and Human Services.

In a Congress where the Republican leadership has vowed to cut taxes and, at the same time, preserve the Social Security trust fund and abide by budget caps imposed in 1997, the welfare trove looks to some like money better spent elsewhere, regardless of the 1996 agreement.

In the House, Ohio Republican John Kasich, chairman of the committee which proposed last year's cuts, is advocating expanding the flexibility of the 1996 law to allow states to use welfare savings for education expenses, such as school construction and teachers' salaries.

Kasich, who is seeking the Republican nomination for President, unveiled his idea yesterday in the House FY 2000 budget blueprint.

Other members of the House who, with Kasich, strongly supported the welfare bill in 1996, want to leave welfare funds intact and dedicated to services for the poor. Connecticut Republican Nancy Johnson has vowed to oppose Kasich's proposal. Johnson is also critical of the Senate Appropriations bill.

On Tuesday, she sent a letter to the nation's governors warning of the threat to their welfare grants and promising her support. She offered a number of ideas on how states could use their funds, including subsidizing child care for the working poor, creating one-stop career centers/welfare offices and increasing services to poor fathers.

"Unless states begin spending more of this money, we will eventually lose the battle to protect it here in Washington," Johnson wrote.